EP236: The Biggest Tax Mistakes Real Estate Investors Make - Interview with Craig Cody

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This episode of Investing in Real Estate is sponsored by eero. With eero, you can install an enterprise-grade WiFi system in your home in just a few minutes. For free overnight shipping to the US or Canada, visit eero.com and at checkout select overnight shipping THEN enter promo code INVESTING.

Taxes are an integral piece of running any business, and real estate offers some of the largest benefits. But unless you’ve planned appropriately, you’ll likely miss out on some of the deductions that real estate investing has to offer.

On this episode of Investing in Real Estate, I’m sitting down with Certified Public Accountant and Certified Tax Coach, Craig Cody. Craig is here to share the biggest tax mistakes that real estate investors make, and give his predictions on the future of the tax code. We’ll talk about the importance of planning appropriately, and Craig is giving away a free copy of his new book!

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Craig Cody’s background is in law enforcement—he worked as a New York City police officer for 17 years. He explains that although he doesn’t find reading the tax code thrilling, helping people save tens of thousands of dollars on their taxes provides a rush similar to what he experienced on the force.

In his career, he’s noticed that there are a lot of things in the tax code that people simply do not take advantage of. The first is that people do not plan appropriately. Instead of being proactive, most people don’t speak to their accountant until March or April. At that point, it’s too late to fully take advantage of certain items in the tax code.

For example, the home office deduction is a great tool that entrepreneurs and investors can use to save on taxes. Craig explains that in order to qualify, you must have a space used primarily for business purposes. This room has to be the principle place where you conduct business, and you must spend at least 12 hours a week working from that location.

Additionally, Craig explains that far too many people have audit paranoia. Although no one wants to be audited, it’s a non-issue when you’ve planned appropriately and documented everything in detail. He explains that he sees audit paranoia stop many people from doing things that are legally allowed in the tax code.

Craig is also an Amazon best-selling author, and he wants to share a free copy of his newest book with you. To claim your free copy of 10 Biggest Mistakes That Cost Business Owners Thousands, click here!

If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.  

On this episode you'll learn:

  • hat are the tax advantages of family employment? 
  • How does cost segregation work?
  • What does Craig anticipate changing in the tax code?
  • How can you deduct mileage for travel?
  • And much more!

Episode Resources
eero
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 Craig Cody shares the biggest tax mistakes that real estate investors make, and give his predictions on the future of the tax code. 

EP225: 8 Tax Deductions for Real Estate Investors

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My favorite tax accountant Tom Wheelwright likes to say, “if you’re a real estate investor and you’re paying taxes, then you’re doing it wrong.” One of the top benefits of real estate investing is the enormous overall implication on your tax burden.

On this episode of Investing in Real Estate, I’m sharing eight deductions your tax advisor should be accounting for. I’ll talk about expenses like travel, education, and much more. If you want to make sure you have all your bases covered in order to lower your taxes, don’t miss episode 225!

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  1. Depreciation - The current tax code allows an investor to claim depreciation on each property for 27.5 years in order to account for wear and tear. Claiming depreciation is a powerful tool for mitigating your overall tax burden.
  2. Travel – Whether you invest in your backyard or out of state, travel expenses count as business expenses. Keeping track of mileage, car rentals, airfare, and hotel stays is a way to qualify your business expenses are eligible write offs. Even meeting with your accountant or attorney can be a deduction.
  3. Vehicle – If you use your vehicle for business purposes, you can write off a percentage of your vehicle purchase. Tracking mileage and gas is also a way to turn your daily driver into a legitimate tax deduction.
  4. Meals and entertainment – When you have meals that qualify as business meetings, you can count them as a business expense. Natali and I have lunch dates with an agenda where we speak solely about our real estate business.
  5. Education – Enrolling in courses or classes to broaden your real estate knowledge counts as a business expense! Even services like Lynda or a subscription to the Wall Street Journal are educational expenses that qualify as business expenses, and are therefore deductions.
  6. Pay children – Since our real estate venture is a legal business entity, we are able to give our children jobs and pay them accordingly. They work for our business by doing small administrative tasks. For example, every Saturday, it is their duty to shed documents, put stamps on envelopes, and deliver outgoing mail to the post office. Similar to any other employee, this counts as a tax deduction.
  7. Home office –  If you have an office in your home used solely for business purposes, you can claim part of your home as a business expense. There are strict stipulations surrounding this one—your office must have a door, and it must be exclusively an office. A guest bedroom/office or home gym/office does not qualify.
  8. Management fee -  If you’re working with a property management team, their monthly fee is a legitimate business expense.

If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.

On this episode you’ll learn:

  • What types of office supplies count as business expenses?
  • Can you write off admission costs to real estate meetings?
  • Does going to the bank count as a business expense?
  • What is the equation for calculating your net rental income?
  • And much more!

Episode Resources
Provision Wealth Strategists
EP022: How to Maximize Depreciation – Interview with Tom Wheelwright
EP109: How to Write off Date Nights on Your Taxes
EP202: How Your Kids Can Invest in Real Estate with an IRA
Tom Krol Wholesaling: The Easiest and Fastest Way to Make Money in Real Estate
Home Office Deduction - IRS
Subscribe to Investing in Real Estate on iTunes
Find Your Financial Freedom Number
Subscribe to the Morris Invest YouTube channel
Like Morris Invest on Facebook

 One of the top benefits of real estate investing is the enormous overall implication on your tax burden. Here are 8 tax deductions for real estate investors.

EP214: The 6 Rules of Using a 1031 Exchange

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A 1031 exchange is an incredibly powerful tool that allows an individual to save on taxes after the sale of a piece of real estate. This tax deferral program permits the investor to sell a real estate property and then reinvest the funds in a property of equal or greater value. Doing so allows the investor to keep more money in their pocket, and defer all capital gains taxes. 

On this episode of Investing in Real Estate, Natali and I are sharing the six rules you must follow when conducting a 1031 exchange. We’ll discuss best practices for dealing with the IRS, and what you must do to successfully complete a 1031 exchange and defer taxes. We’ll also share more details about our favorite 1031 experts, and discuss resources you can use to learn more! 

 

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  1. In a 1031 exchange, the properties involved must be held for either business or investment purchases. You cannot conduct a 1031 exchange on your primary residence.
  2. The IRS requires that the investor identify their purchasing plans on day 45. The investor must describe the property or properties they are planning to use as the replacement in the exchange.
  3. The IRS also has a strict timeline that the investor must uphold. The investor has 180 days to complete the exchange. This begins on the day escrow closes on the sale. 
  4. The investor must also work with a qualified intermediary. This is a third party that holds the money for the exchange in escrow.
  5. The title on the new purchase must be identical to the old property. For example, if first property was held in an individual’s name, that person cannot put the new purchase in their LLC.
  6. A 1031 exchange permits the investor to sell a real estate property and then reinvest the funds in a property of equal or greater value. The investor cannot make a purchase for less than the original property. This would defeat the purpose of deferring taxes on a gain.

If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family. 

On this episode you'll learn: 

  • Can you conduct a 1031 exchange on a rental property that used to be a primary residence?
  • Why does the IRS put a time constraint on 1031 exchanges?
  • What is the 200% Rule?
  • What is the 3 Property Rule?
  • How can you use a 1031 exchange to pass real estate down to your heirs tax-free?
  • And much more!

Episode Resources
EP197: The Legal Loopholes of Real Estate - Interview with Garrett Sutton
Loopholes of Real Estate by Garrett Sutton
EP053: The Power of a 1031 Exchange for Exploding Your Rental Portfolio - Interview with Lance Growth
EP158: How to Defer Taxes Forever with Real Estate - Interview with Leonard Spoto
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 The six rules you must follow when conducting a 1031 exchange, plus best practices for dealing with the IRS, and what you must do to successfully complete a 1031 exchange and defer taxes.

EP203: How to Maximize Depreciation - Interview with Tom Wheelwright

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This episode of Investing in Real Estate is sponsored by ZipRecruiter. With ZipRecruiter, you can post your job to 100 plus job sites with just one click. Find out today why ZipRecruiter has been used by businesses of ALL sizes to find the most qualified job candidates with immediate results. Visit ZipRecruiter.com/investing to post your job for free!

Taxes can be confusing, and when you’re investing in real estate, there’s even more to consider. That’s why we’re welcoming Tom Wheelwright back to the podcast to talk about how real estate investing can mitigate other tax burdens, and how you can make sure you’re getting the most benefits out of your investments.

Tom Wheelwright is a tax genius who authored the book, Tax-Free Wealth. He is the founder and CEO of ProVision, as well as the personal tax advisor of “Rich Dad,” Robert Kiyosaki. Today on Investing in Real Estate, Tom is covering everything you need to know about real estate investing taxes! 

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In terms of taxes, Tom calls real estate investing “a little piece of magic.” This is because from a tax standpoint, you get a deduction not only for the money you’ve invested in your property, but also the money the bank has invested.

Tom has always worked with real estate taxes, because he finds it fascinating. Your property typically increases in value, you pay no money on your cash flow, and by leveraging your investment correctly, and you can create a cash flow.

Real estate investing can mitigate other tax burdens for those who are in a highly taxed income bracket. This is why it’s a wise idea to take the money you’ve earned in your business, invest it in real estate properties, and get the tax benefits to offset earned income.

On today’s show, Tom also shares his insight into 1031 exchanges, the importance of being organized, and how to take full advantage of depreciation in your real estate investments. Additionally, Tom is giving you two ways you can find a well-educated accountant who can help you make the best decisions about your real estate investments, and reap the most tax benefits! 

If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.

On this episode you’ll learn:

  • Why you should never put a real estate investment inside an IRA.
  • What does Tom consider the ultimate magic in real estate?
  • Why your tax advisor and tax preparer should work for the same company.
  • How to set up your business structure for real estate investing
  • The importance of cost segregation.
  • And much more!

Episode Resources
ZipRecruiter
Call ProVision at 866-467-5809
ProVision Wealth Strategists
Tax-Free Wealth by Tom Wheelwright
Subscribe to Investing in Real Estate on iTunes
Find Your Financial Freedom Number
Subscribe to the Morris Invest YouTube channel
Like Morris Invest on Facebook

Connect with Tom Wheelwright
Website
Facebook
Twitter
LinkedIn

 Tom Wheelright shares how to take full advantage of depreciation in your real estate investments.

EP190: What Is Passive Loss and How Can You Use It on Your Taxes?

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Although the word “loss” has a negative connotation, a passive loss in your real estate business can actually help you save money! On today’s show, Natali and I are talking about passive losses, and how they can benefit you in your real estate business.

We’ll discuss the general rule about passive loss, as well as the two exceptions. We’re sharing how we use passive losses, and how you can apply this topic to your real estate business and tax return! Please join us for episode 190 of Investing in Real Estate!

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A loss on your taxes means that your business did not make any money for the IRS to tax in a certain year. Claiming a loss is actually beneficial when tax time comes around, because then you don’t owe money! Many high earning investors like to claim a loss, in order to lower their overall tax burden.

Passive loss, however, only pertains to passive income. Luckily, real estate investing falls under this umbrella. Passive loss is anything in which the investor is not a material participant.

The tax law states that you can claim up to $25,000 as an individual if you have an adjusted gross income of $100,000 or less per year. From my experience speaking with hundreds of investors, the majority do not fall under this category.

But luckily, there are a couple exceptions to that rule, which we will outline on today’s show. Tune in to hear Natali and I share more about passive loss, and what we learned from Garrett Sutton’s book, Loopholes of Real Estate! Don’t miss episode 190!

If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.

On this episode you’ll learn:

  • What are the two exceptions to passive loss?
  • How can passive loss explode your ROI?
  • What is a material participant?
  • How does an investor qualify as a real estate professional?
  • Do you have to be a licensed real estate agent in order to qualify as a professional?
  • And much more! 

Episode Resources
Loopholes of Real Estate by Garrett Sutton
Rental Property Cash Flow Worksheet
Subscribe to Investing in Real Estate on iTunes
Find Your Financial Freedom Number
Subscribe to the Morris Invest YouTube channel

Like Morris Invest on Facebook

 Although the word “loss” has a negative connotation, a passive loss in your real estate business can actually help you save money!

EP168: Your 401k Is Under Attack

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This episode of Investing in Real Estate is sponsored by Thumbtack. Visit thumbtack.com to find help in your area with more than 1,100 services.

Many Americans have been convinced that the 401k is the best investment plan around. You probably know by now that I disagree with that, but now lawmakers are proposing to take away additional tax advantages from private retirement plans.

On this episode of Investing in Real Estate, I’ll discuss dwindling retirement returns, how the 401k compares to the benefits Congress receives, and their plans to roll back incentives from 401ks. Don’t miss episode 168!

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According to a recent article by the Wall Street Journal, Congress is planning to remove even more savings from the 401k plan. In contrast to the retirement plan that Congress members receive, the 401k pales in comparison.

Congress members receive a amalgamation retirement plan that consists of a 401k type plan in addition to a pension plan. Alternatively, only 13% of Americans in the private work force have a pension plan. For most people, the 401k is as good as it gets.

Additionally, Congress members also only pay 0.03%, vs. the 1% fee that most Americans pay. So a fee on a retirement vehicle can be up to $100 for the average American citizen, whereas a Congress member would only pay $3.

Not only is the system unequal, but also Congress is looking to make cuts to retirement plans that the average American utilizes. This article suggests that while making cuts to traditional retirement programs, Congress should make matching cuts to their cushy system.

If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.

On this episode you’ll learn:

  • What is the Federal Employees Retirement System?
  • Why is the idea of a pre-taxed retirement flawed?
  • What was the original intent of a 401k?
  • Who profits from a 401k plan?
  • And much more!

Episode Resources
Thumbtack
Grab Your Pitchforks, Your 401k May Need Defending from Congress
Subscribe to Investing in Real Estate on iTunes
Find Your Financial Freedom Number
Subscribe to the Morris Invest YouTube channel

Like Morris Invest on Facebook

 

 According to a recent article by the Wall Street Journal, Congress is planning to remove even more savings from the 401k plan. | Retirement savings | Investing

EP158: How to Defer Taxes Forever with Real Estate - Interview with Leonard Spoto

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If you’ve ever wondered about selling an investment property, today’s show is for you. Our guest is Leonard Spoto, the co-founder of Asset Exchange Company. Leonard is here to share his extensive knowledge on how a 1031 exchange can help real estate investors defer taxes forever.

On this episode, Leonard is sharing the four basic guidelines of a 1031 exchange, and why it’s important for real estate investors. We’ll also talk about the three D’s of investing, and the crucial steps involved in a successful 1031 exchange. Please join me on episode 158 of Investing in Real Estate! 

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At Asset Exchange Company, Leonard and his team have worked with thousands of investors to create wealth through real estate. Leonard posits that the 1031 exchange is one of the greatest wealth building tools available to investors. A 1031 exchange allows an investor to defer capital gains taxes on the sale of an investment property by purchasing a new property.

A 1031 exchange allows the investor to keep more money in their pocket, and use it as additional purchasing power on their next transaction. Leonard explains that a 1031 exchange is permitted under section 1031 of the Internal Revenue Code, but there are strict guidelines that must be followed in order to qualify.

First, the properties involved in the exchange must be held for either business or investment purposes. This information is proven by tax returns, including rental income, depreciation records, and intent. It’s important to have this documentation in place in case of an audit.

There are also regulations in place for the new purchase. The new property must meet the reinvestment requirements. This means the new property must be of equal or greater value than the property that was sold.

Additionally, there is a strict timeline that the investor must uphold. The investor has 180 days to complete the exchange. This begins on the day escrow closes on the sale. Leonard explains that it’s important to work with an accommodator, such as his team. You also must reach out to your accommodator before escrow closing.

Finally, the IRS requires that the investor identify their purchasing plans on day 45. The investor must describe the property or properties they are planning to use as the replacement in the exchange.

On today’s show, Leonard is sharing so much more about the power of 1031 exchanges. He’ll share how to initiate an exchange, and the importance of an accommodator. We’ll talk about how a 1031 exchange is like a 401k, and the importance of long-term deferment!

If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.

On this episode you’ll learn:

  • What is the three property rule and the 200% rule?
  • Can you conduct a 1031 exchange on a primary residence?
  • Which states have high tax liability for sales of property?
  • How can you declare intent when purchasing a property?
  • When does the time frame begin for a 1031 exchange?
  • And much more!

Episode Resources
Subscribe to Investing in Real Estate on iTunes
Find Your Financial Freedom Number
Subscribe to the Morris Invest YouTube channel

Like Morris Invest on Facebook

Contact Leonard Spoto
Call at 877-471-1031
Website
Facebook
LinkedIn

 

 If you’ve ever wondered about selling an investment property, this is for you. Leonard Spoto shares his extensive knowledge on how a 1031 exchange can help real estate investors defer taxes forever.